Washington, DC -- (SBWIRE) -- 10/15/2014 -- Nationally Syndicated Financial Myth Busting Radio Show with Host Dawn Bennett, CEO of Bennett Group Financial Services, LLC, on October 5, 2014 interviewed Anthony Kim, a Policy Analyst for Economic Freedom at the Heritage Foundation.
He talked about the future of the world's freest economy, Hong Kong, and how this small island economy, which is the world's most prosperous, is going to deal with what's going on there, and why Americans should pay close attention to what happens next.
Here is the interview with Mr. Kim:
Q: Before we get into the protests rocking Hong Kong, let’s talk about your specialty; economic freedom, and Hong Kong's role as the world's freest economy. Can you explain what the Index for Economic Freedom is, and why it's important?
A: Sure. The Index for Economic Freedom is a joint annual publication by the Heritage Foundation and The Wall Street Journal. It measures a country's economic freedom, meaning the relationship between the government and the people.
We try to measure how easy it is to do business and how low is the tax burden. What we measure is the overall entrepreneurial environment, how easy is it to conduct business, operate a business and those key elements of regulatory efficiency.
Based on our methodology and annual study, Hong Kong has been No. 1 throughout the past 20 years. It's not an easy achievement, but Hong Kong has been committed to upholding those good policies that advance economic freedom.
Q: So, can you explain briefly how Hong Kong got so wealthy? It's a small island nation, and it doesn't have a lot of natural resources, which seems to be key today to getting wealthy. How did it achieve all this prosperity?
A: Very effective implementation of those good policies that promote competition, limited government and regulatory efficiency, and really open markets to global trade and financial interaction.
As you said, Hong Kong is very small, and it doesn't have any natural resources, but through good policies, low tax burden, regulatory efficiency and open trade, they've been able to build up this very prosperous economy over the last 20 to 30 years. When you talk about Hong Kong, it's basically about those free market policies.
Q: But how have they been able to do that since they became part of China? How did it go from being part of the British Empire to being part of China? It just seems like exactly the opposite in principles.
A: Before 1997, Hong Kong was under the control of the United Kingdom. Before then, they were running their own economic policy-making. The whole situation now is under Beijing’s huge influence.
Before 1997, especially since 1945, Hong Kong has been able to make its own economic policies under the guidance of the United Kingdom and British policy-making. So, under that, they've been implementing a lot of free market policies and free trade policies, as well.
Q: So, that brings us to the protests that we see in the news today. What are students angry about over there, and why is this a youth-led movement? Presumably, if China's taking away Hong Kong's freedoms, older residents would be angry as well.
A: I think what we are seeing is really the real-time interplay between the economic freedom and political freedom. All year we talked about how Hong Kong has become such a prosperous economy, and we know it's through the advancement of economic freedom.
Now, people in Hong Kong, especially since 1997, they really see their freedom in a bolder stance, meaning, including their political freedom, and it's been eroding day by day and month by month. Especially those young people, they see really heavy influence, political influence, over Beijing. They want a direct democracy, but what China has been presenting to Hong Kong’s people is much less than that. They want Chinese authority. They want to screen their candidates first, and then they want to grant an indirect democracy to the people of Hong Kong. That's why a lot of young people, who’ve been longing for, and eager to achieve greater economic freedom as well as political freedom, decided to demand greater political freedoms directly from China.
Q: Do you have any thoughts on how this might play out? China is obviously not one to back down in a situation like this.
A: The situation is still very fluid, but I think my concern is that each side, both Chinese authority and these protesters, know exactly what they want to achieve. Chinese authority does not want to let these protesters go forward, and a lot of protesters, especially those young students, they clearly expressed that they want to have a greater democracy and political freedom. So the situation now is that I think going forward next week, it'll be much more tense, and I certainly hope not to see any tragic loss of human life or property. The situation is tense at this point.
Q: It appears to me that the Chinese government's wait-'em-out type of tactic is working at least optically, but behind the scenes, I understand pro-government gangs have gone to attack the pro-democracy supporters. Do you think that these gangs are being paid by the Chinese government, or do you think they're just doing it on their own?
A: I cannot say that for sure, but I think that we have a lot of factors that have to be considered. Obviously we cannot rule that out completely, but the situation, once again, it's getting much more complicated, because all of a sudden, this Hong Kong issue is not anymore just a Hong Kong issue. It becomes China's domestic political issue as well as a national security issue.
What we can say for sure is Chinese leadership is paying really greater attention to this ongoing situation in Hong Kong, and they would not back down. They are clear about what they want to do. They do want to keep Hong Kong under their political control.
Q: There’s a rumor that the pro-democracy activists are actually a tool of the United States. What do you think about that?
A: Well, I heard about it, but before we talk about that, let's take one step back. Earlier you pointed out these protesters, largely are students, around the 17 to even 30-something years old. They are the future of Hong Kong. Let's say if this time those students, those pro-democracy protesters, they accept, "Okay, we will not pursue any more turmoil at this point." That doesn't mean the end of the story. They will be in Hong Kong for the next two, three, four decades. China inevitably, they'll have to face pro-democracy demands once again, maybe many more times. So, this is really about the real-time interplay between economic freedom and political freedom.
Q: You've said they maintain their rating on the Economic Freedom Index, correct?
A: Yes. Ever since China took over, they've maintained it.
Q: So what are these activists, these young students, afraid of? It seems to me that they're running a different economy in Hong Kong than they are in China.
A: Right, but if you look into those key components of upholding Hong Kong's competitiveness and economic freedom, we have one indicator called rule of law. Under that, there's one component about the corruption. So, a lot of young students in Hong Kong, they see a double-sided sort of a situation in their economy. One, it's very efficient, but at the same time, a lot of policy-making process is not really super transparent.
They definitely feel that under China's sort of heavy political influence, they are losing their voice in terms of demanding greater democracy and rule of law. It highlights the situation in terms of the economic freedom and political freedom interaction.
Q: So, they're losing their voice. You're talking about China reportedly trying to block domestic press, and this includes social media, from reporting exactly what's going on in Hong Kong. Do you think in this era something like that is even possible?
A: Over the years, especially since 1997, the things in Hong Kong, especially those of subtle freedom, press freedom and alike have been under sort of a greater influence over China. So, people in Hong Kong, again, those young students, they really feel that this is not the Hong Kong they used to know. Hong Kong has become sort of another city of China, and they do not want to have that. They are very used to having greater freedom.
In terms of expressing their ideas and opinions, they definitely feel that heavy dosage of China's political influence and they try to reject that future.
Q: Do you think we're seeing the beginning of another Tiananmen Square?
A: I'm very cautious about speculating on that. Certainly I do not want to see that, but we cannot rule out that because, as we know, China is not a democratic nation. This is a one-party controlled, communist-controlled country. So, if Chinese leadership feels threatened by these protesters, they may go to extreme measures, but also they do know that they cannot go down that path that easily. So, this is really a test of Chinese leadership, too.
Q: What would U.S. involvement mean for credibility of the protest movement, and actually the future of Hong Kong?
A: As we go forward, that question will become much bigger. Obviously people in Hong Kong, and especially people in the region, I think they will look for any sort of evidence of the U.S. leadership in this matter, but the U.S. has been, at best, very cautious, limiting its words. I think it's very hard to say. You know, we won't see any sort of credible level of leadership coming out of Washington, D.C. on this matter because this is a very subtle matter, I think. What's disappointing is that, I think we should be more vocal about supporting Hong Kong's democracy, but the action has been very limited at this point.
Q: If that's the case, what has been the U.S. involvement, do you think?
A: It could be a number of options, but, at this point, what we can sort of think of is that perhaps direct expression of disappointment. I think given the fact that Hong Kong is part of China, it becomes a U.S.-China sort of relationship angle.
The recreation will be much more complicated. I think maybe that's why policy makers in D.C. are saving some words until they see really the clear side of China's aggression against Hong Kong.
Q: Are you seeing any other countries stand with Hong Kong against China?
A: To be honest, a lot of countries are simply waiting and seeing. To a certain degree I feel like people in Hong Kong, they've been betrayed by China and somehow abandoned by many friends and allies around the world.
This is about freedom and democracy that we've been pursuing and struggling to achieve greater levels. Hopefully, a peaceful resolution, but time will tell what kind of a final outcome we will have. I don't see any big support pouring into Hong Kong, other than, “We are with you.” It’s kind of a nice gesture at this point.
Q: Why aren't they supporting them? Why aren't they standing with them? Are they afraid of China?
A: The situation is very subtle and complicated. At this point, what they can do, at best, is wait and hope for a peaceful resolution. No doubt that a lot of leaders, policy makers around the world, are paying greater attention to Hong Kong, but they're, at this point, saving their words and action too.
Q: What about a Hong Kong activist? Since nobody's standing up with them, they're on their own. How should they respond to that? Were they expecting us to come in and help them? Anybody, around the world? How should they respond?
A: As time goes by, that becomes really a tricky question for those protesters, too. At this point, they have an ultimatum by the Chief Executive in Hong Kong saying that, by Monday, October 6, you guys have to clear out those barricades and stuff. It's a very tense situation, and I think that as we go into Monday, we'll have a better picture on that cycle, too.
Q: Is it because that's the end of the holiday?
A: Yes, and government workers are coming into work. So we are getting into the second and third phase of this protest movement, but, it'll be very critical.
Q: What holiday are Hong Kong and China are on right now?
A: Since October 1st, it has been China's National Day. So, it's been a kind of week-long holiday season. Usually, in Hong Kong this is a big sort of obedience time because mainlanders from China, they go to Hong Kong. They buy a lot of stuff, like shopping season. It's ending as of today and then getting into the October 6, this will become a normal sort of day with the end of the big holiday season, and it becomes a new beginning of China's democracy movement.
Q: Some of the protesters are from Occupy Hong Kong. This is obviously a left-wing movement. Are these protesters united, or are they complaining about different things?
A: They are fairly united. Are you talking about the Hong Kong's Occupy Central versus Occupy Wall Street here?
Q: Yes. Yes. Yes.
A: I think they're a bit different. In Hong Kong, what they want is greater democracy. It's really a united movement led by students, and they do know what they want to achieve. The movement in Hong Kong vs. here in the United States, is quite different from what's happening in Hong Kong. It's more, as you pointed out, left-wing. It's more about inequality arguments. It's more against the free-market system. In Hong Kong, it's clearly about greater democracy and political freedom.
Q: Do you think when they go back to work next week, this is all going to fall apart?
A: Tough to say. I don't expect any sort of meaningful resolution of the movement. They'll come back again and again, again. These young students, I don't think, even though they're young and weak at this point, as they go forward, they will collect new energy and power and they'll come back again and again. I don't know in terms of a magnitude, in how many people they can recollect in terms of demonstrating their voice, but they're not going to disappear in a way.
Q: I know Hong Kong had two successful revolts against the Chinese government before; one in 2003 and one in 2012, and they won those. This time it just seems it's going to be much more difficult. It seems like the doctrine of one country and two systems. Maybe those didn't seem as easy back then, but they certainly won those. Do you think they really have a chance to win?
A: I think they certainly want to have that chance to be realized, and that's why it's been unfolding for a few weeks. Over the past years, they have seen that China will not keep their promise in a way, granting that level of autonomy that Hong Kong has been wanting.
That’s why people at this time cannot really be any more patient. They’ve got to see real action and demonstrate willingness and demand, and that's what we are seeing now in Hong Kong.
Q: What about Taiwan? Are they participating in this?
A: They probably are watching this very closely too. There's people in Taiwan that issued an official statement saying, "We support the people in Hong Kong. We support their brave movement. “ I bet a lot of students in Taiwan are also watching this situation very carefully, and support strongly the people in Hong Kong, too.
Q: We hear in the U.S. often that people are fed up with America's ever-growing laws, taxes and regulations, and they want to move to a freer country. Do you hear that? And if you do, what kind of advice would you give?
A: On our index economic freedom index, the United States is not even one of the Top 10 freest economies in the world. Now the United States ranked No. 12, behind Canada and Chile. We've been losing our economic freedom because of the big government policy, this big government mentality in action in terms of reforming our regulatory efficiency and other gains. So, we are getting into a very critical situation, too. Unless we reverse this downturn of our economic freedom, we will have to face a harsh reality, meaning we are losing our business to other countries. We are becoming more uncompetitive and job creation will be very dull and dry.
The United States is the only country that has been losing economic freedom for seven straight years. So, that's an alarming situation. Unless we really get together in terms of promoting good policies that promote economic freedom, we will lose continuously and other countries are catching up. They do implement effective tax policy, tax reforms and regulatory reforms, but again, we are, making it for our entrepreneurs and future entrepreneurs, more difficult to do business in he U.S.
Q: Can you be more specific about how things have changed in the last seven years under President Obama?
A: In the name of rescuing and saving our economy, the programs and policies are a heavy dosage of government intervention being made in terms of the spending and regulatory policies.
One example is that unsigned bill in the name of obtaining no regulatory deficiencies in the financial market. We added a lot more uncertainty and a lot more unnecessary regulations, and therefore what we have is inaction by the business community, by the private sector, because they don't know what to expect in terms of this kind of uncertain and ongoing regulatory change environment. A lot of people are simply trying to wait it out to see any meaningful reforms in our economy. This uncertainty is adding a lot of cost.
I wonder if there will be a solidarity protest here that would actually help us move higher up on the rankings? We will see.
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Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included Rock Legend Ted Nugent, as well as Steve Forbes and Grover Norquist. The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses investing.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or firstname.lastname@example.org